Population Situation in India

Population, as a source of human power, plays a significant role in the economic development of a country. Both the quality and quantity of population are essential elements for economic growth. India’s population increased rapidly in the post-independence period. Between 1951-61, there was an increase of 7 crore and 78 lakh in India’s population. This growth rate per cent which is more than the growth rate in the last 40 years. This rapid growth of population is called ‘Population Explosion’ Since 1951, population has been continuously rising. Thus the main problem of India, on the one hand, is the rapid rate of growth of population and on the other hand, it is the problem of poverty of population. In terms of GDP India ranks 12th in the world. But at the same time India’s large population makes it one of the world’s poorest countries in terms of per capita income.

Size and Growth of Population

From the point of view of population, after China, India occupies the second place in the world and from the point of view of area, her place is seventh. Thus on 2.4 per cent of world’s area and with 1.2 per cent of world’s income, India is maintaining 16.6 per cent of world’s population. It is evident from this that there is excessive burden of population on India. Every year there is an addition of about 1 crore 70 lath in our country’s population.

The trend of the growth of population in India since 1921 has been continuing. That is why Census Commissioner has referred to the year 1921 as a “Year of Great Divide” From 1951 onwards is a period of population explosion. The main cause of the excessive rise in population in 50 years (1951-2001) was that whereas the birth rate did not show much fall, the death rate declined substantially due to better medical aid and facilities.

Causes of Increase In Population or Causes of Population Explosion

Population in a country can increase because of two factors

(a) Difference in With rate and death rate.
(b) Difference between Immigrants and emigrants.

It is the difference between birth rate and death rate that influences the growth rate of population in India. The main cause of increase in population is the substantial decline in death rate as compared to birth rate. Between 1901 and 1910 birth rate was 49.2 per thousand and death rate was 42.6 per thousand. Between 1971 and 2001 the birth rate declined to 27.2 per thousand and death rate to 8.9 per thousand. Thus even now birth rate is sufficiently high while death rate has declined considerably. Thus there are two main causes of increase in population (i) High birth rate and (ii) Low death rate.

Birth rate and death rate in India are high as compared to several countries of the world(Birth rate refers to number of child,’n born per thousand persons in a year and death rate refers to number of people dying per thousand persons in a year. Then it is said that birth rate in India is 27.2 it implies every year 27.2 children are born per thousand persons, on the average. The difference between birth rate and death rate is known as growth rate or survival rate.

Causes of High Birth Rate

The causes of high birth rate are: (a) Natural factors, (b) Universality of marriage(c) Early marriage, (d) Poverty (e) Illiteracy, (f) Low status of women, (g) Joint family system, (h) Social views, (i) Less effect of family planning.

According to Dr. Chandershekhar, high birth-rate is part of our culture. When the physical attitude of the society changes, either voluntarily or under the pressure of circumstances, then only the rate will decline in India.

Causes of Declining Death Rate

Death rate in India has declined from 27.4 per thousand in 1950-51 to 8.9 per thousand )2000-01 and it is due to the following reasons: (a) More medical facilities, (b) Decline in epidemics,(c) Facilities of maternity homes, (d) Spread of female education, (e) Decline in social evils, (f) Urbanisation of population, (g) Late marriages.

Consequences or Effects of Population Explosion

In he context of economic growth and social welfare it is necessary to know whether population increase is beneficial or not. The reality is that problem of population explosion in India happened to be a big hindrance in the success of economic planning and rapid rate of economic development. It has neutralised all the good efforts made during the five-year plans. Poverty, unemployment, km standard of living, low rate of capital formation, shortage of food supply, low per capita income etc. in India are to a large extent, the consequences of population explosion.
The main benefit of population increase is that it has provided sufficient labour for agricultural and industrial development. In India about 30 crore are working population. This has provided not only inefficient workers but also efficient workers such as engineers, doctors, administrators, teachers etc. India has third place in the world so far as the supply of technical manpower is concerned.

Suggestions or Remedies for Population Control

A definite population policy is required for the solution of population problem. According to Planning Commission, population policy in our country should be based on the following two elements:

(A) Growth rate of population should be brought down. (B) Economic Development of the country to improve its economic condition.
(A) For decreasing the growth rate the following measures may be adopted: (i) Late Marriages,. (ii) Spread of education, (iii) Improvement in the standard of living, (iv) Respectful position for women in the society (v) Encouragement to urbanisation, (vi) Change in the social outlook, (vii) Spread family planning, (viii) Adoption of children, (ix) Spread of Ayurvedic methods, (x) Abortion, (xi) Propaganda.

(B) Economic Development. With a view to solving the qualitative problem of population, it is imperative that there should be economic development of the country. That is the only effective way of catering to the needs of ever-rising population. Economic development implies fuller and proper utilization of natural resources. Modern methods of production should be adopted in agriculture and industries. Labourers be imparted technical training for increasing the efficiency.

Causes of Poverty and Measures to Remove it

In almost all underdeveloped countries where population growth is high, per capita income is very low. Unskilled labour and income inequality have resulted in number of evils of which poverty is certainly the most serious one. Rapid growth of population causes poverty and proves to be a barrier to development. These countries should take care of their population growth if they seriously wish to solve their poverty problem and put their economy on the path of economic development.


Poverty is one of the major problems in India. It is a curse not only for an individual but also for the entire nation.

Poverty refers to the inability to get the minimum consumption requirements of i.e health and efficiency . The minimum includes food, clothing, housing, education and minimum health requirements. Non-fulfillment of these minimum needs causes lot of suffering and distress. There is a loss of health and efficiency. Consequently it becomes difficult to get rid of poverty or to increase production in future. Poverty and decline in productivity are thus inter-related.

In India, poverty is determined on the basis of poverty line. According to Planning Commission of India persons spending Rs. 324 on consumption in urban areas and Rs. 271 in rural areas per month (at 1993-94 prices) should be treated as falling within the poverty line. The number of persons living below poverty line in 1999-2000 was estimated to be 26.1 crore.

Absolute and Relative Poverty

There are rich societies and poor societies. Therefore, inequalities exist between these societies. Within, a given society also, there are rich people and poor people. People are relatively poor or rich, so are societies or nations. When we talk that some people are rich and others are poor, we divide the people by some fixed level on a scale of income criterion in two classes. This cut off point is known as poverty line.

When we talk in terms of relatively rich or poor, we make pair wise comparison and this is called relative poverty On the other hand when inequality for each pair, society or nation may be thought of in term of the absolute difference between incomes of the persons of a given pair is called absolute poverty.

Causes of Poverty

Dada Bhai Naoroji, while examining the poverty has divided its causes into two parts: (i) Under- development of Economy, (ii) Inequality of Income.

I. Under-development of Economy: Under-developed nature of Indian economy is the main cause of poverty. Indian economy is under-developed because of the following reasons (causes) :

(a) Rapid increase in population,

(b) Slow rate of economic growth,

(c) No fuller utilization of natural resources,

(d) Shortage of capital,

(e) Constant increase in price level,

(f) Low productivity of agriculture,

(g) Shortage of skilled labour and technical knowledge,

(h) Shortage of able entrepreneurs,

(i) Widespread unemployment,

(j) Industrial backwardness,

(k) Vicious circle of poverty

(l) Defective educational system,

(m) Shortage of means of transport and communication,

(n) Various social, religious and political causes.

II. Unequal Distribution of Income : There is unequal distribution of income in India. According to an estimate, 20 per cent people of the country own 41 per cent of national income. According to Monopoly Enquiry Commission, 1,536 companies in the country are under the control of 75 families. Efforts were made during planning to remove inequality in the distribution of income through taxation system and other measures. But in spite of these measures the tendency towards inequality of income and concentration of wealth has been on the increase.

Suggestions for the Removal of Poverty

Following suggestions can be made to remove poverty: (i) Control over population, (ii) Growth rate may be increased, (iii) Increase in employment opportunities, (iv) Development of agriculture,
(v) Reduction in economic inequality, (vi) Price-rise may be controlled, (vii) Increase in the production of goods for mass consumption, (viii) Change may be brought in production technique, (ix) Removal of regional disparities, (x) Provision for minimum needs of the poor, (xi) Increase in agricultural and industrial productivity. (xii) Provision of social security to workers such as provident fund, old age pension, sickness benefit, unemployment insurance etc.

Government Measures to Remove Poverty

Government has taken the following main measures under five-year plans to eradicate poverty.

(i) Government introduced Integrated Rural Development Programme in 1978 with a view to remove poverty in rural areas and making provision for full employment.
(ii) In 1980 the Government launched Natzrnal Rural Development Programme in place of food-for- work programme in order to remove poverty in rural areas.
(lii) National Scheme of Training for Rural Youth for Self-Employment (TRYSEM) was launched to reduce unemployment among the youth of the country
(iv) Rural Landless Employment Guarantee Scheme (RLEGS) was introduced on 15th August, 1983 to eliminate poverty among landless labourers.
(v) Special measures have been taken by the government to develop small and cottage industries.
(vi) Minimum Needs Programme was launched during the Fifth Plan to raise the standard of living of the poor. The programme covers primary education, adult education, rural health, rural water supply, rural roads, rural electrification, rural housing and ecological improvement of urban slums.
(vii) A new Twenty Points Programmes was launched in 1982 with a view to bringing prosperity to masses and relieving them from the bonds of poverty.
(viii) Government has also introduced many social security maisws.
(ix) Nehru Rozgar Yojana was started in 1989 to provide employment to urban poor and Jawahar Rozgar Yojana to rural poor.
(x) Employment Assurance Scheme was started in 1993 to provide employment to unskilled workers.

Consumer Awareness and Public Distribution System

Modern age is the age of consumerism. In the modern capitalistic forms of economic system, the sovereignty of consumers prevail. With the change in preferences of the people day by day, variety of goods are flowing in the markets. Factors of production are getting diverted towards the commodities whose demand has been increasing. Selling costs are increasing tremendously. Through advertisements people came to know the new products availability. Hence it is obvious that modem age is the age dominated by consumers.


The knowledge of the consumers rights and protection of consumers)is called consumer awareness. Modem age is the age of consumers. Variety of products are being produced according to the preferences of the consumers. In modern capitalistic form of economic system, markets are flooded not only with domestic goods but also with foreign commodities and consumer sovereignty has been on the top. Selling costs to attract the attentions of the consumers have been increasing. In other words, a lot of money has been spent by the producers or marketing companies on advertisements.


Consumers being not united remain indifferent about their rights and duties. Consequently, at every step, they are exploited by business community or middleman. The following are the factors which lead to consumer exploitation:
(1) The attitude of disintegration among consumers
(2) Lack of education
(3) Non-availability of systematic consumer awareness programmes
(4) Traditional attitude of the consumers
(5) Poverty
(6) Inferior complex in consumers
(7) Lack of adequate information etc.


The problems of the consumers are as follows:
() Problem of adulteration; (2) Problem of inferior quality; (3) Problem of charging price more than the fixed price; (4) Problem of weight measure; (5) Problem of disobeying the guarantee conditions; (6) Wrong publicity regarding the quality of product; (7) Not delivering the product in time; (8) Neglect of timely service etc.


The following are the main rights and duties of the consumer:
(1) Right to security; (2) Right to get information; (3) Right to go to consumer courts; (4) Right to get compensation; (5) Right to go for consumer education.


Legislations ensuring consumer rights or consumer protection means to protect the consumers against exploitation. To provide justice to consumers against exploitation on the basis of black marketing, adulteration, price discrimination etc. is the main objective of consumer protection programmes.

Being influenced by worldwide consumer awareness programmes, Government of India also passed ‘Consumer Protection Act’ in 1986. Under this legislation provisions of advisory board and judicial forums have been made. Consumer Protection councils of centre and state level have been established. To provide timely justice to consumers National and State Commissions have been established. ‘District Protection Forums’ at the district level have been doing yeoman’s service in this field.

If the value of service or compensation is less than Rs. one lakh, then the complaint is registered with District Protection Forum. If the value of compensation is between 1 lath to 10 laths, then the complaint is lodged with the State Commission on Consumer Protection. If the value of compensation is more than 10 laths then the complaint goes to National Commission. Consumer can lodge complaint on a simple paper without any help of an advocate. The relief to consumer is given in the following ways:
(a) By repairing the commodity; (b) By replacing the commodity; (c) By refunding the paid price; (d) By providing compensation equal to the loss to the consumer.


Government of India has been taking strongest efforts to popularise the consumer awareness programmes through seminars, advertisements etc. Topics of consumer awareness in the syllabus of schools, colleges and university classes have been incorporated. Thus we can say that consumer awareness is essential only then the interest of this community can be made secure.


Modern age is the age of consumers. As a result of it products are standardised. Consumers are well aware about the quality of products. Only those products are getting market who are standardised. There competition is growing day by day among the producers. Selling cost plays a vital role in this context. Non-Price competition is also going on. As a result of it, consumers are getting good quality of products at cheap rates. So we can say that in the modern era, consumer awareness is responsible for standardisation of products.


Consumer awareness also improved the public distribution system. Before discussing the improvement in public distribution system we must know the meaning of public distribution system.

A) Meaning of Public Distribution System
The objective of establishing a public distribution system in India is to provide essential items of consumption at low and subsidised prices to consumers in order to protect them from the effect of a price rise. PDS is the major instrument of the government economic policy for enhancing food security for the poor. Under this, the Central Government bears the responsibility of the procurement and supply of five commodities viz. rice, wheat, sugar, imported edible oil and kerosene to the states and union territories.

The Government buys products from the traders at procurement price, which are set somewhere between the minimum support price and the price in the open market and distributes these products through a chain of fair price shops. The buffer stock is also used to maintain a free flow of essential foodgrains.

B) Improvements in Public Distribution System

In order to make PDS more responsible to the needs of the poor, the ‘Targeted Public Distribution System’ (TPDS) was introduced in June, 1977. This system attempts to target families below poverty line (BPL) at heavily subsidised rates. According to Economic Survey 2001-2002, the quantity of foodgrains earmarked to meet BPL requirement including Antodaya families is 18.52 million tonnes per annum at the rate of 25 kg per family per month benefiting an estimated 65.2 million poor families while for the population above poverty line (APL), a quantity of 10.33 million tonnes of foodgrains per annum is earmarked for distribution under TPDS.

State Initiatives for Controlling Price Rise


The state initiatives to control undue and untimely rise in prices have been at two levels — demand management and supply management.

Demand Management

This implies putting a check on the demand of the public for goods and services. To control the demand the state has two options:

(1) Monetary Policies. Monetary Policies would include use of Cash Reserve Ratio (C.R.R.) and Statutory Liquidity Ratio (S.LR.) to control money supply in the economy.

(2) Fiscal Policies. Fiscal Policies would include reduction in Government expenditure and introduction of increased taxes.

Supply Management

This implies controlling the volume of supply of goods and their distribution system. The initiatives adopted by the state to manage supply are as follows:

(1) System of Dual Prices. The state adopted a system of dual prices in the case of certain commodities such as paper, sugar, cement etc. Under this system, the poor sections of the society were supplied these goods through fair price shops, at controlled prices. At present dual pricing is used only in case of food items.

(2) Fixation of Maximum Prices. To eliminate the incentive for hoarding, smuggling and speculative activity in foodgrains, the state has been asked to fix the wholesale and retail prices of foodgrains.

(3) Special Measures for Production of Oil seeds and Edible Oils. The domestic production of oil seeds is not sufficient to meet the demand. Therefore, state has mostly resorted to imports. The high international prices of edible oil often result in imported price rise. The state has therefore initiated short- term and long-term plans to step up the production of oil seeds in the country.

(4) Setting up of Public Distribution System. An important aspect of the state supply management policy has been to strengthen the PDS as well as make it more target-based.

(5) Maintenance of Buffer Stocks. The Food Corporation of India (FCI) maintains buffer stocks for main agricultural products to increase supply in case of shortages to maintain stability in prices.

(6) Adoption of Open General Licence. In case of shortages, the adoption of OGL has eased the imports of sugar, pulses etc.

(7) Control over Private trade in Foodgrains. To eliminate hoarding, smuggling and speculative activity in foodgrain trade, wholesale dealers in foodgrains have been licensed in many states.

Cause of Price Rise

Price fluctuation indicate the general economic conditions of a country. Persistent rising prices may be good for industrial and trading classes due to increased profit margin but it adversely affects the salaried class and poor people.


Prices are what must be given in exchange for something. Prices are usually expressed in terms of a quantity of money per unit of a commodity but in the barter system the price of a good is what other good or goods it can be exchanged for. Price changes are the means by which the competitive process determines the allocation of resources in the free-market economy.


The consequences of price rise are as follows:
(i) A continuous increase in domestic price level makes exports costlier. As a result of it, this discourages the foreign exchange earning.
(ii) Investment decisions cannot be properly taken due to fluctuations in price level. Money value of investment projects goes up, which necessitates mobilisation of larger money resources. Savings fall, high cost economy retards the growth prospects.
(iii) Price rise also brings about inequality of income and wealth in the society since the salaried class and poor people suffer the most.
(iv) In the first phase of price rise, comparatively larger rise in agricultural products compared to non-agricultural products tilts the inter-sectoral terms of trade in favour of the agricultural sector.


In India, price rise is due to both cost-push and demand-pull factors. The high increase in vegetable prices is an example of demand-pull inflation, when the shortage of vegetables in the market takes the prices to new heights. Price also rises whenever there is a hike in petroleum products. Price rise due to costlier petroleum products is because of the cost-push factor. This is so because petroleum is an important. factor in many manufactured items, and, as an essential fuel for road transport, it adds to the transportation costs; so prices, in general, tend to rise. The main demand-pull factors are as follows:

a) Increase in Government Expenditure
The total expenditure of both the central and state governments has been steadily increasing over the years. This expenditure implies a growing demand for goods and services, and is, thus an important factor for rise in prices.

b) Deficit Financing
The Government of India has been using deficit financing as a method for financing economic development. While revenue deficit has been rising, fiscal deficit has been rising even faster. The distributing fact is that this fiscal deficit is financed at high rates of interest from the market. The increased government expenditure financed through deficits. This increases the money supply in the country and consequently pushes up the demand for goods and services and thus prices.

c) Black Marketing and Hoarding
The unaccounted money or black money as it is commonly called, is used in buying and selling of real estates in urban areas, extensive hoarding and black marketing of many essential and inflation- sensitive commodities such as sugar, edible-oil, onions and pulses etc. caused steep rise in prices of these commodities.

d) Smuggling
Smuggling is also an important component for rise in prices. When goods will be smuggled there will be tax evasion, as a result, government revenue remains less. Now government increases the tax and this will lead to price rise in the smuggled commodities.

e) Rapid Growth of Population
The rapid increase in population implies a continuous increase in demand for foodstuffs and other materials, often resulting in persistent rise in prices.
The main cost-push factors responsible for price rise are as follows
(a) Fluctuation in Output and Supply: There have been a violent fluctuation in the output and supply of both agricultural and indistrial goods. This fluctuation increase the cost of production and hence prices.
(b) Taxation: Cost-push factors consist mainly of rise in wages, profit-margins and costs. Government imposed fresh commodity taxes give an opportunity to the traders to raise the prices of goods, the proportion of which is always more than the levy of taxes.
(c) Administered Prices : The public sector units used to continuously raise the prices of their products and services which generally constitute the raw material for other industries. There were regular upward revisions of several administered prices of cement, steel and coal etc. thereby pushing up the prices. But this factor is, however, losing its relevance with the opening up of the economy since 1991.
(d) Hike in Oil Prices : Serious inflationary pressures were also created due to the sharp hike in the price of crude oil in recent years.

Benefits and Shortcomings of Economic Liberalisation, Globalisation and WTO to Indian Economy

Benefits of Economic Liberalisation, Globalisation and WTO to Indian Economy

The Economic Liberalisation, Globalisation and W.T.O. will be beneficial to the Indian economy in several ways such as:
(a) Increase in rate of growth.
(b) Increase in competitiveness of industrial sector.
(c) Reduction in poverty and inequality
(d) Increase in the efficiency of public sector.
(e) Fall in fiscal deficit.
(f) Control on prices.
(g) Decline in disequilibrium in balance of payments.
(h) Favorable to middle class people.
(i) Development of small scale industries.

Shortcomings of Economic Liberalisation, Globalisation and WTO to Indian Economy

The main shortcomings are as follows:
(a) Less importance to agriculture.
(b) More dependence on foreign debt.
(c) More importance to privatisation.
(d) Increase in unemployment.
(e) Loss of economic sovereignty.
(f) Dependence of the economy of foreign technology.
(g) Pressure of World Bank and IMF.
(h) Promotion of consumerism.

Process of Liberalisation, Globalisation and Privatisation

The entire world economy has been experiencing dramatic changes since the eighties. In the recent past the economic reforms have been as widespread as today. Economic reforms are being undertaken at such a pace that they are sweeping the entire Eastern Europe and developing economies. These countries are gradually discarding old economic systems and following the new economic systems. There has been a remarkable change in the economic and social institutions all the world over. Countries are following economic reforms in order to have more rapid and sustained economic growth. India is one of the developing countries which has brought economic reforms for quicker development of the economy.

Process of Liberalisation

Economic liberalisation means reducing government interference in economic activities and encouraging privatisation. Liberalisation implies liberating the trade and industry from unnecessary restrictions and at making the industries more competitive. The new industrial policy has abolished the system of industrial licensing for all industrial undertakings except 5 industries. It means 85% of the industry has been taken out of the licensing framework. Now the industries need not take any prior sanction from the government. It can increase its capacity to produce the goods. The producers are free to decide what commodities they are to produce. The asset limit of 100 crores for MRTP companies has been scrapped. The investment limit for tiny sector has been raised to 25 khs and for small scale industries to Rs. 3 crores. The industrialists are free to buy foreign exchange from the open market and make necessary imports. Sanction of government is not required now. As a result of this liberal policy, there will be more competition among industries and they will strive for more efficient production.

The main objectives of process of liberalisation are as follows : (1) Removing the obstacles in the process of economic development, (2) Increase the competitiveness of the Indian industries in order to enter the international markets, (3) Widening the scope of private sector, (4) Ensuring the development of agriculture sector, (5) Stopping in efficiency, misuse of resources and red tapism, (6) Developing better money and capital markets, (7) Solving the basic problems of the economy.


In a narrow sense privatisation implies the induction of private ownership in publicly owned enterprises but in a broader sense it implies besides, private ownership the induction of private management and control in the public sector enterprises. Under new economic reforms, policy of encouraging private and discouraging public sector has been accepted. The number of industries reserved for the public sector since 1956 was 17. This number has now been reduced to 4. It means 13 industries have been thrown open to the private sector.

Previously, the public sector enterprises were reserved for certain areas but now the private sector has also been allowed to enter these areas. This means injecting competition into these areas. The government has also privatised the ownership of some public sector undertakings. It has been done by the sale of a part of the capital of some selected enterprises to the private sector. Thus, by disinvestment of a part of the capital the government has made public enterprises accountable to the private sector criterion, namely, market related profits. Thus with the expansion of privatisation there is every possibility of increase in productivity and efficiency.


The term globalisation is considered as an important element in the reform process. Globalisation means unification or integration of the domestic economy with the world economy. This is the result of a number of policy initiatives taken by the government. The main policy initiatives are as under:

(i) Rupee was devalued by 21% in 1991 in order to bring it down to the realistic level in terms of the domestic price level and the world price level. Rupee has also been made fully convertible.
(ii) The removal of licensing of large many export items has also enabled the exporters to supply their goods to more countries where there are the chances of export promotion.
(ii:) Direct foreign investment upto 51% of foreign equity has been allowed in 48 industries. 74% direct investment has been allowed in 9 categories of industries and 50% direct investment has been allowed in 3 types of industries. Now our economy has been open in respect of both exports and direct investment. All these steps will help in the development of trade in the world.

Thus globalisation means pursuing:
(1) Reduction of trade barriers so as to permit free flow of goods across the world; 9 (2) Creation of environment, allowing free flow of technology;
(3) Creation of environment for free flow of capital among the world nations;
(4) From the point of view of the developing countries, creation of an environment for free flow of labour in different countries of the world.
The advocates of globalisation, more especially from developed countries, limit the globalisation definition to only three components, viz, unrestricted trade flows, technology flows and capital flows. However, several economists in the developing world believe that flow of labour cannot be left out. But the whole issue whether debated at the W.T.O. or at other forums blacks out the labour flows as a necessary component of globalisation.

Inter-relationship of Various Economic Sectors and their Significance

There is no line of demarcation among all the sectors mentioned above. All these are closely related. Private and public sectors are two aspects of an economy and cannot be separated. Though competitive yet both are complementary to each other and are a source of inspiration for one another. Private sector depends on the public sector for the supply of transport and communication services, heavy machines, tools and equipments etc. as a basic necessity of trade, commerce and industry.

(a) Similarly primary, secondary and tertiary sectors are also dependent on each other. Primary sector mainly uses the traditional methods of production while the secondary sector relatively applies the modern methods of production. On the other hand the Tertiary sector is a mixture of the two. On the one hand, it has modem elements like railways, air transport, banking etc. and traditional elements like bullock cart transport on the other.

The primary sector provides raw material like sugarcane, oil seeds, cotton, jute, iron ore, wood etc. to the secondary sector. The secondary sector uses these raw materials for the manufacturing processes and also supplies tools and equipments like agricultural machinery, mining equipment, fertilizers to the primary sector. As already mentioned, the tertiary sector provides the services which are most essential for both the primary and secondary sector. But the tertiary sector too depends on both the primary and secondary sectors, because it gets essential product like food from the primary sector and the items like building calculating machines, computers and certain other equipments from the secondary sector. Thus all these three sectors are interdependent and interlinked and the productivity and efficiency of each sector is governed and influenced by the other.

(b) As mentioned above, the public and private sectors are also closely related to each other They fulfill the needs of each other. In the day to day dealings, every entrepreneur, whether in the private or in the public sector, comes into contact with each other. For example, if a public sector undertaking constructs a road or a bridge, or a private firm builds a factory building, both will have to buy bricks, cement, steel and other necessary material, have to depend on transport facilities, have to borrow money from the banks, have also to insure its goods. For all these activities and purposes, they have to maintain transactions with the firms producing cement, steel and wooden articles, providing services like air transport, rail transport, road transport or shipping and functioning as banks and insurance companies. Some of these firms can be in private sector while some others in the public sector. The level of productivity whether the public sector undertaking or the private firm, will be influenced by each other. Thus, we can say though both the sectors function separately yet they are closely related and are interdependent. Both are complementary to each other. In a mixed economy, like India, growth of both the sectors is instrumental for economic growth.

(c) So far as the urban and rural sectors are concerned, there can be no two opinions as to how both are closely related and how they are intensely dependent on each other. Although urban sector is relatively modern and rural sector relatively traditional yet there remains a coordination between the activities of both the sectors. The rural sector provides food, green vegetables, milk products and other raw material to the urban sector and the urban sector in return supplies the manufactured goods like cloth, steel, cement, fertilizers etc. to the rural sector. Thus, the interrelationship and interdependence between both the sectors cannot be questioned and doubted.

Since the economic prosperity of the country depends upon the development of all these sectors, thus these sectors must develop by all means. Any slackness in the development of one sector will stop the development of the other. As all these sectors are interdependent in relation to demand and supply of goods, the slow growth of one sector will influence adversely the other. We know that in our rural sector there is mass unemployment and poverty owing to the prevailing primitive conditions there. This aspect is badly shadowing our relatively efficient urban sector, as it is not prospering in a desired way. Thus, the poverty, inefficiency and low productivity of any sector can become a great hurdle in the pace of economic development of the continuity. Thus for the rapid economic growth, it is essential that these sectors must grow at a faster rate.

Output of various Sectors, Their Productivity and Economic Development

While comparing the productivity three things are kept in view: (a) working conditions and working hours, (b) quantity of the product, and (c) quality of the product. Thus, at a particular time and under similar conditions if people, in a sector produce better quality or better quantity or both of a product as compared to the other sector then the former sector will be considered more productive.

Productivity has a direct relationship with the product. Output increases with the increase in productivity. There are many factors which influence the productivity in a sector e.g. climate, racial qualities, education, training hours of work, working conditions, income, production technique, mobility of labour, social and economic conditions etc. The use of modern tools, machines and equipment also increase the productivity. Thus, increase in productivity in each sector is most essential for the rapid economic development of the country.

So far as the Indian economy is concerned, the productivity of any of its sector depends on the productivity of every other sector because all the sectors are inter-related and inter-linked. The rural sector output is related to urban sector output; the output of public sector is dependent on the output of private sector; the outputs of primary, secondary and tertiary sectors are inter-linked; the outputs of organised and unorganised sectors are also linked.

As the productivity of each sector is linked, if the productivity of any sector falls, it will adversely affect the productivity of other sectors also. For example, if the productivity of the private sector industries is less, it will also lead to less productivity of the public sector industries who is using private sector output. Similarly, if the industry producing sugar starts producing less, then the productivity of agriculture, producing sugarcane would also be adversely affected. On the other hand, if agriculture starts producing less of cotton, it will adversely affect the productivity of cotton textile industry. As economic development is the result of the sum total of the activities of all the sectors, the increase in the productivity in any sector will increase the pace of economic development and similarly decreased productivity will slow down the economic development.

Main Sectors of the Indian Economy

The division of the main sectors of the Indian economy is done on the basis of ownership and occupation.

4.1. On the Basis of Ownership

Indian economy is divided into two sectors on the basis of ownership:

(a) Private Sector: This sector is a key sector in an economy. It is that sector of an economy which is engaged in its own business, profession and occupation, apart from public sector. It may be an individual proprietorship (or one-man business) or partnership or joint stock company. Professionals like doctors, lawyers, chartered accountants, etc. also form private sector. All other persons also come under private sector who are engaged in their occupation as self-employed. All the economic activities of the private sector are influenced by the profit motive.
Because the main objective of the private sector is to earn maximum profit, thus, it works hard with concentration and efficiency. It tries to have minimum wastage and optimum utilization of the available resources. It tries to improve the quantity and quality of product by producing it at a minimum cost. It also endeavours to improve the technique as far as possible. Thus, the private sector contributes much so far as the economic growth of the country is concerned.

In India, three types of production institutions are included in the private sector. (1) Non-organised Entrepreneurs such as farmers, weavers, artisans, goldsmiths, retail and wholesale sellers. (2) Small Industries—In India, small industries are those wherein Rs. 3 crore of fixed capital has been employed. (3) Ancillary Industries — These are those industries where fixed capital worth Rs. 3 crore has been employed. (4) Large Scale Industries—Such as Tata Iron and Steel, Delhi Cloth Mill etc. In India agriculture, cottage and small industries are almost completely under the private sector.

According to the Industrial Policy Resolution of 1956, the industries have been classified into three categories: (a) Schedule ‘A’. In it 17 industries such as iron and steel, petroleum, air hansport, railways etc., are included. All new undertakings in this category are to be in the public sector (b) Schedule ‘B’. It consists of 12 industries such as drugs, fertilizers, road transport, machine tools etc. New undertakings in this category can be both in the public and in the private sectors. (c) Schedule ‘C’. All the remaining industries are left entirely to private enterprises. Old enterprises in the first two categories, such as Tata Steel, which are ‘set up by private sector can remain in the private sector now.

In the Industrial Policy of 1991, only 6 industries of national importance have been left with the public sector, all the other industries have been allotted to the private sector.

The private sector in India has been progressing satisfactorily for the last five decades. Between 1951 and 1999, the government enterprises increased from 5 to 240 whereas the enterprises in the private sector increased from 23,825 to 5,12,061 during the same period. In 1997-98, the contribution of the private sector in Gross Domestic Product was 73.5 per cent as compared to 26.5 per cent of the public sector.
There are certain defects in the private sector in India. First, the private sector works only for its individual interest and profit motive. This selfish motive many a time ignores the national objectives and priorities. Second, big traders and industrial houses have become monopolists and have concentrated the economic power and wealth in their hands. Third, in mosf of the industrial units of the private sector, there are chronic industrial disputes and units are sick and have been closed.

(b) Public Sector: It refers to that sector which is controlled and owned by the government and whose organisation and management is also conducted by the government. These days the significance of the public sector has decreased,

Objectives of Public Sector. The main objective of the public sector is an increase in output and efficient use of resources for economic development. The other objectives are as follows : (i) More capital formation, (ii) Establishment of heavy and basic industries, (iii) Economic equality (iv) Check on the evils of monopoly, (v) Increase in welfare activities, (vi) Establishment of defence industries, (vii) Reduction in the regional inequalities, (viii) Getting revenue from government enterprises, (ix) Attainment of self-dependence, and (x) Increase in employment.
Present Positiou.. The total number of public enterprises was 5 on 31st March, 1951 at the beginning of the First Five-Year Plan and total investment was rupees 29 crore. On 31st March, 1999 the number increased to 240 with a total investment of rupees 2,30,140 crore. These public sector enterprises now participate in the trade of steel, coal, fertilizer, iron ore, shipping, foodgrains etc. The contribution of public sector to the gross domestic product in 1997-98 was 26.5 per cent and in capital formation it was 45 per cent.

Certain important public enterprises are steel plants in Bhilai, Durgapur and Rourkela; Chittranján Locomotive factories. Many financial institutions like Reserve Bank of India, Life Insurance Corporation of India etc., Indian Airlines, Railways, Food Corporation of India, Unit Trust of India etc. have also been established in the public sector.

It would be seen from the table that during the period of 38 years, the public sector has practically doubled its share in the GDP in real terms and now accounts for one-fourth of the economy. This is undoubtedly a significant change in the structure of the economy in terms of the increased importance of the public sector in domestic activity.

4.2. On the Basis of Occupation

On the basis of occupation the economy can be classified as under:

(a) Primary Sector. The activities like agriculture, animal husbandry, forestry, mining, quarries, fisheries etc. are included in primary sector. It is primary sector because it is the first and the oldest occupation of man. Thus all activities related to procuring, gathering or producing goods from materials, provided by nature, are called primary activities or occupations. These occupations are hunting, fishing, mining, grazing or rearing of animals, agriculture etc. Physical environments generally influence these primary occupations.

(b) Secondary Sector: In this sector factories, industries, cottage and small industries, mineral industries, construction, electricity and water supply are included. This sector is also known as industrial or manufacturing sector. As the primary sector cannot satisfy all our needs, we also require some industrial goods which may make our life more comfortable and this requirement is fulfilled by the secondary sector.

(c) Tertiary Sector: Cohn Clark calls this sector as Service Sector. In this sector transport, communication, banking, trade, commerce etc. are included. These services and facilities provided by the tertiary sector, increase the efficiency of the primary and secondary sectors and provide them the much required knowledge and information. These services also make available the facilities like education, health, insurance, administration which are very much needed for improving the life and in raising the standard of living. In absence of these facilities we cannot even imagine of our existence in this world i.e. without these we cannot pull on our life smoothly.

Prof. Cohn Clark and Simon Kuznets, after viewing the occupational distribution of labour-force, have concluded that with economic development, percentage of labour force in primary sector decreases, in secondary sector it increases and in tertiary sector it increases more rapidly Following conclusions can be drawn about the occupational distribution of population in India : (i) The main occupation in India is agriculture, (ii) There is less development of industries, (iii) Economy is much unbalanced, (iv) Per capita income is low and standard of living is also law, (v) Majority of the population lives in small villages and population living in cities is lesser, (vi) Our agriculture is backward, (vii) There has been no specific change in the occupational structure for the last 80 years. The reason for this is the slow rate of economic development, more importance to heavy and basic industries and too much increase in the number of labourers in the country

It would be seen that over the period, the primary sector’s share has fallen while that of tertiary sector has increased.

Suggestions : Pid. bdla and Merchant have suggested that small and medium industries may be expanded to correct the occupational distribution. These industries may be established in the villages. These may be run on modem lines by using electricity and more labourers may be absorbed in them. Dr. V.K.R.V. Rao is of the opinion that instead of removing people from agriculture in future, it would be better if more important resources are created in it.

For bringing a change in the occupational structure in India it is necessary that on the one hand the increase in population be checked and on other agricultural sector may be developed. Small and large scale industries ,be expanded. Industrialisation may be rightly coordinated with agricultural department. Labour intensive technology may be attached more importance, only then change in the industrial structure possible.

4.3. Rural and Urban Sectors

Both the sectors a significant role in the Indian economy. The rural sector in the Indian economy is very late the urban sector is comparatively smaller. A significant feature of a developing economy is with the passage of time as the urban sector goes on growing and becoming larger the rural sector smaller. At present about 72% of the total population of India covers the rural sector. However trends of urbanisation is increasing due to an attraction of life and living in the urban sector. The facilities like education, employment, transport, medical aid etc. are increasing the size of the urban estimated that by the year 2005 the rural sector will be having no more than 65 per cent of the population. In spite of this, significance of rural sector will not diminish but will remain more than the urban sector. And it is being constantly said that India lives in rural areas.

The share of agriculture and mining in the NDP in 1999-00 was 27.5 per cent whereas the share cf manufacturing industries was 24.63 per cent and of trade and transport was 47.87 per cent. Reduction of share of agriculture horn 59.26 per cent in 1950-51 to 27.50 per cent in 1999-00 points to economic growth of the country overtime. But the gap between agriculture and manufacturing industries depicts the relative importance of the rural sector. With the economic growth, this gap is narrowing, but will still remain large for a longer period.

The rural sector plays a key role even for the development of urban sector because it supplies basic raw materials to the main industries. Besides supplying food, the rural sector also makes a provision of a large quantity of non-food grain agricultural output. In 1998-99, for example, it produced about 12.2 million bales of cotton, 8.12 million bales of jute, 296 million tons of sugarcane and 25.2 million torts of oil seeds. All these commodities are the basic raw materials for some of our big industries. Besides this, the mines also provide the other raw materials like iron and other metals along with the most important fuel and source of energy in the form of coal. Thus, the prosperity of urban sector will largely remain dependent on the prosperity of the rural sector in the years to come.

But in India still the old and outmoded methods of production are being used in agriculture in most areas. The system of land tenure, in most part of the country, is too defective. (There are also many other factors responsible for the backwardness of agriculture). The present inequality and social injustice are not only a great hindrance in production in the rural sector but also an instrument of slow economic development of the country, thus systematic land reforms and modern technique of production are required to remove it.

Nature or Basic Feature of Indian Economy

Indian economy has dualism. On the one side there is a subsistence sector while on the other is a modernized developing sector. Thus Indian economy is an under-developed economy leaning towards economic development. The nature of Indian economy can be explained by its following characteristics:

1. Indian economy is an under-developed economy. The per capita income of certain countries like America, England, Japan, Germany etc. is much higher than that of some countries like India, Pakistan, Ceylon, Bangladesh etc. The economies of the former are known as Developed Economies and that of the latter are known as Under-developed Economies.

The main features of Indian Economy as an under-developed economy are as follows: (1) Per capita income is less as compared to almost all countries of the world. (2) The standard of living, level of consumption and efficiency of the people is very low. (3) On the one hand there is low per capita income and on the other there is inequality in the distribution of income and wealth. (4) There is too much dependence on agriculture but agriculture is backward. (5) There is slow growth of industries and also paucity of some important industries. (6) There is a shortage of banking and credit facilities, specially in rural areas. (7) In a vast country like India, the means of transport like rail, road, water and air are insufficient. (8) About 15 per cent of the world population lives here. Thus, there is a much pressure of population here. (9) There is lot of unemployment and under-employment here. (10) The rate of capital formation is low and it is about 20 per cent as compared to 39 per cent of Japan. (11) There is a scarcity of able and efficient entrepreneurs. (12) The social institutions like caste system, joint family system, law of inheritance, customs, religious systems are a hindrance in the economic development of the country.
According to Prof. Reddaway, “The main characteristic of Indian economy is its poverty. It is also a main indicator of its under-development.”

2. Indian Economy is a mixed economy. Just after independence the industrial policy of 1948 was adopted after the First Five-Year Plan. The industrial policies of 1956, 1977, 1980 and 1991 aimed at economic development of the country on the basis of a mixed economy. The main features of Indian economy as a mixed economy are: (1) Existence of Public sector, (2) Joint or National sector where both – the public and private sectors work together, (3) Existence of private sector, (4) Existence of cooperative sector for the economic development of the poor and middle class, (5) Special encouragement to the establishment of small and cottage industries reducing the inequality in the distribution of income and wealth and unemployment.

The public sector has done a commendable job to establish basic industries like iron and steel, machine building, chemical etc. on the basis of the policy-framework of a mixed economy for economic development. The transport services like railways, airlines and roadways are in the public sector while the road transport (particularly the goods transport) is run by the private sector. Though these services serve both the urban and rural areas yet they are largely urban based.

According to Dr. K.N. Raj, “Although Indian economy has been a mixed economy yet the element 0/this mixture has still framed it like a capitalist economy, not like a socialist economy.” The reason for this is that still the significance attached to the private sector in the economy is more than the public sector.

3. Indian economy as a planned developing economy. Indian economy has a large traditional rural sector and a small modern urban sector. In rural India, the economic activities are mainly agricultural while the main industries are in the urban part. After independence, India has adopted the path of economic planning to achieve the objective of economic growth. This was done under the leadership of Late Prime Minister Pt. Jawaharlal Nehru after surveying physical, capital and human resources of the country India’s First Five-Year Plan was adopted in 1951, Second Five-Year Plan in 1956, Third Five- Year Plan in 1961, Three One-Year Plans in 1966, Fourth Five-Year Plan in 1969, Fifth Five-Year Plan in 1974, Sixth Five-Year Plan In 1980 and Seventh Five-Year Plan in 1985, One-Year Plans in 1990, Eighth Five-Year Plan In 1992 and in 1997, Ninth Five-Year Plan in 1997 and In 2002 Tenth Five-Year Plan has been adopted which is to be terminated in 2007.

There has been an improvement in the economic condition of the country than before, after the adoption of Five-Year Plans. That is why Indian economy is called as Developing Economy.

4. Federal Economy: Besides the above three characteristic features of Indian economy, it has also a federal character provided by the Indian Constitution. As per the constitution, the power to regulate the economic life of the people is distributed between the Centre and the States. The Centre owns the full responsibility of guiding and controlling most of the major economic activities (if necessary) of the country. But a large part of the important economic activities have been assigned to the States. For example, power generation is mostly in the hands of State Electricity Boards under the State governments, even though the Central Government has a large say so far as the installation of power plants is concerned. Thus, there are two types of the government institutions dealing with the economic activities of the country viz. one at the Centre and the other at the State level.